- - Wednesday, December 31, 2014

It doesn’t matter whether the Dow hits 20,000 or higher in 2015. The big investment play is in government, not the private sector.

Tip: Buy red tape — and companies that profit from it.

President Obama pledges to veto whatever Republicans try to do in Congress. But nobody is vetoing what Mr. Obama is doing with the bureaucracy.

In 2014, the president’s executive branch minions issued 78,978 pages of new regulations, divided among 3,541 topics (as counted by the Competitive Enterprise Institute). The Friday before Christmas, Mr. Obama revealed his plans to issue 1,200 more regulations next year, on top of 2,375 others already pending.

When Congress passed a 1,600-page spending bill in December, its immensity was front-page news. So was their 1,600-page legislation on national defense (with lots of non-military goodies thrown in). When the Obamacare legislation topped 2,700 pages in 2010, that was big news also. But 75,000 pages of regulations go unmentioned by most media watchdogs. Those dogs chase cars but not jumbo jets.

America’s biggest growth industry is government. Government’s biggest growth sector is the executive branch — currently the personal fiefdom of Mr. Obama. The days are past when national defense dominated the spending, and government contractors are adjusting.

The Center for Budget and Policy Priorities calculates today’s spending mix as: defense and national security (19 percent); Social Security (24 percent); health care, including Medicare, Medicaid, Children’s Health Insurance Program and Obamacare (22 percent); other public assistance programs, including Food Stamps, public housing and school lunches (12 percent); payments to retired federal workers and to veterans (8 percent); and interest payments on our $18 trillion national debt (6 percent).

The scraps are divvied up among transportation, education, national parks and other items.

The number of people needed to manage all those billions of dollars keeps growing. You cannot track payroll by the number of federal employees, though, because so many contractors are hired to do the work, with the top 25 federal contractors in 2013 receiving $175 billion.

Contractors are following the money as Mr. Obama’s priorities and other trends shift funds out of defense and into health care and social services. Under sequestration’s spending “cuts,” the Pentagon absorbs half of the reductions although it’s only a fifth of overall spending. (Of course, only in Washington is something called a “cut” because the increase is smaller than previously planned.)

The money follows the presidential directives. So federal contractors have become conglomerates, adjusting their business models to follow the money through the bureaucracy.

The Washington Post reports that General Dynamics, known for defense expertise, paid $1 billion to purchase health-data firm Vangent and “instantly” became “the largest contractor to Medicare and Medicaid.” Only pharmaceutical makers Merck, Pfizer and GlaxoSmithKline have bigger contracts with the Department of Health and Human Services than does General Dynamics, which in 2013 pulled in $788 million from HHS.

Lockheed Martin now shares in a $15 billion data management contract for Medicare and Medicaid, reports the Post. And the company is bidding on an $11 billion Pentagon contract to manage medical data. Rivals Northrop Grumman and Booz Allen Hamilton also have moved into the health care business.

They’re all following the money. Even if Republicans refuse to approve a single new penny for Obamacare, the original legislation granted it $111 billion in advance appropriations, plus extra slush funds. That provides bureaucrats tons of money to throw at contractors. And the arrangement pays bureaucrats to draft an estimated 20,000 pages of Obamacare regulations (and still rising).

To vendors, all this red tape is a profit center, a cash cow. It was part of the Democrats’ plan to guarantee lasting support for Obamacare, not only by providing subsidies to millions of individuals to pay otherwise unaffordable insurance premiums, but by making businesses dependent on the law as their source of income. The companies don’t want the law repealed because they profit from it.

This is where our tax dollars are going, even as doctors, hospitals and insurers struggle with the financial burdens of Obamacare. The bottom line is sad but true: Those who profit from big government may be good stock buys in 2015. But — sorry — you won’t get shares of their stock in exchange for paying your taxes.

Ernest Istook is a former Republican congressman from Oklahoma. Get his free email newsletter by signing up at eepurl.com/JPojD.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide